Not all “revolving doors” turn into corruption
I once used an old adage in this column, “I want less corruption or more ability to participate in it.”
It was a joke. A reader scolded me for this.
I don’t want corruption or participate in it. The trick, sometimes, is knowing what is corrupt.
Senator Elizabeth Warren and Rep. Pramila Jayapal (“W&J”) believe they have identified a corrupt practice involving tax professionals working for major accounting firms. I’m not sure they did.
There are four gigantic companies called “The Big Four”. These are the four largest accounting firms in the world. The fifth largest is quite far behind in size, but still tall.
W&J identified these five companies as participating in a “revolving door” between their companies and the Treasury Department.
On one side of the door, company staff drafted customer-friendly tax rules. On the other side, companies rewarded efforts with raises and promotions.
The W&J presentation is the old “quid pro quo”, loosely translated like this for that. “Do our customers’ auctions at the Treasury and we’ll give you money and prestige in return.” Shame, shame, shame.
If the employees of the company reimburse in exchange for quoing, it is something that I cannot accept.
But are they?
First, let’s look at the W&J load. They identify at least 24 people who left one of the big companies to work at the Treasury and then returned to their company. It definitely seems like a revolving door. W&J, however, calls it a “corrupt” revolving door.
I feel like I know these people a little. I could be wrong, but let me plead my case. I taught training programs for three of the five companies. In most cases, I taught with an associate or employee of the company.
Companies plan these programs well in advance. Firm co-instructors typically come from DC’s “national” office. As the firm’s general resources, they have no emergencies with clients and therefore greater flexibility of schedule.
These national resource persons are often hired by the Treasury. Not always, but I would say that at least 80% of those I have taught with have been hired after working at the Treasury.
I have taught with many people who were directly responsible for writing regulations in a particular area. Others may have written rulings to answer questions posed by tax professionals or IRS field staff.
I’ve heard a consistent message from those former Treasury officials who now work at large CPA firms: “I’d like to know how these rules are actually applied to taxpayer situations.”
The Treasury issues tax guidelines in many forms. Regulation is the highest level of authority. This is because there are public comments on proposed regulations before they become final.
Public comments often point out problems in implementing the rules as they are written. The Treasury significantly changed the regulations for investing in Opportunity Zones when real estate industry professionals commented on how deals are actually done.
The W&J revolving door can be a good thing. People who work in the national office of these large accounting firms receive questions from practice offices across the country. They learn about the problems faced by taxpayers struggling with unclear rules.
While these cabinet experts return (most of them having worked in the Treasury) to the Treasury, they bring with them valuable knowledge of the legitimate issues faced by those trying to deal with often poorly drafted laws.
People I have taught with who have said, “I wish I knew…” could be a valuable resource now that they know. The revolving door does not need to be modified by the word “corrupt”.
Maybe I’m just naive. However, I know from personal experience that people who work in Treasury tax policy are both very intelligent and very opinionated.
The “corrupt” W&J label seems to me to only hold water if those who walk through the revolving door can “roll” their new Treasury colleagues.
Smart, opinionated people are hard to outwit. When public comments arrive on proposed regulations, the Treasury’s response is included in a subsequent “preamble” to the final regulations.
Most responses end with “we declined to accept this suggestion”. I just don’t see how the answer changes when the commentator enters through that revolving door instead.
James R. Hamill is the director of tax practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at [email protected].